The Day at a Glance | April 28 2022

The Top

*US GDP surprisingly contracted during the 1Q22 (-1.4% vs 1.1%e.).

*Inflation in Spain surprised to the downside during April (8.3% annual vs. 9%e.); inflation in Germany continues to increase (7.8%).

*The dollar (DXY) reached its highest level in 5 years in light of higher interest rate expectations in the United States.

*Mexico´s unemployment rate dropped in March (3.5% vs 3.7% prev.).

*We are very close to seeing Europe´s inflationary peak, which will decrease in the second half of the year: Luis de Guindos, ECB.

*EU warns European businesses that opening accounts in rubles in order to pay for natural gas is a violation of the sanctions placed on Russia, and that said actions would lead to consequences.

Economic environment

Economic contraction. The most recent data on United States growth revealed that its economy contracted (-) 1.4% annualized in the first quarter of 2022, figure far from the expected 1.1%. This is the first quarterly contraction since the second quarter of 2020, when the pandemic halted economic activity. Consumption was strong and increased to an annualized 2.7%, with strength in consumption of durable goods (4.1%) and services (4.3%). Private investment became more moderate (2.3%) but still increased due to strong fixed investment (7.3%). Weakness came from government spending & investment (-2.7%) and especially from net exports, which subtracted 3.2% of growth from GDP. Imports increased at an annualized 17.7% during the quarter – and at a constant pace of growth with respect to what was seen at the end of 2021; but exports fell an annualized (-) 5.9% (-9.6% in the export of goods), which caused the external sector to considerably reduce the economy´s growth figure. The final 1Q22 figure reveals that the internal market remains strong as consumption is still increasing, imports are growing at a fast pace and fixed investment is solid, which suggests that the economy maintains a growing trend; even despite the fact that weakness in the external sector (exports) caused growth to log a negative figure. Considering that economic weakness is not widespread – but rather, something that´s occurring exclusively in the external sector – will likely not stop the FED from continuing to carry out aggressive efforts to contain inflation.